Asia - the next big thing in generics - but at what price?
Most people in the generics industry are aware of what a force Asian companies – by which I mean Indian, Chinese and lately Korean companies – have become as sources of APIs and low cost formulations. Indeed, I pointed out that the scale of their increasing presence can be measured indirectly by the CPhI yardstick.
In a previous article, I noted that the number of Chinese exhibitors at CPhI had grown from 39 in 1997 to 578 in 2005. Over the same period, the Indian representation increased from 59 to 163 and the number of Koreans from 1 to 35. Altogether a significant increase in possible Asian sources of APIs and generic formulations, all offered at prices that seem to Western eyes extremely attractive, impossibly cheap and difficult to refuse.
There are signs that other Asian countries are very interested in establishing strong generic industries in their own markets. A very distinct indication this came just over a year ago in Kuala Lumpur. An Asian regional workshop on TRIPS and Access to Medicines was held on 28-30 November 2004 and was attended by policy makers and NGOs from 21 countries
In early December, the participants distributed a press release from which I have extracted a number of significant statements.
“5…… Data on prices of various products within and across Asian countries were presented by resource persons showing that prices of branded products are significantly (and often greatly) higher than similar generic products, and also that the presence of generics brings down the prices of branded products in the same country………………. It is therefore essential that patented drugs do not enjoy monopoly and that competition from generics should be enabled, so that the patients have more choice and prices can be brought down. Many participants also called for price controls to be placed by governments on medicines since these are essential items……….
6. ….. The Doha Declaration has clarified that there are some flexibilities and safeguards including the ability of governments to implement measures such as compulsory licensing, government use/rights and parallel importing, to offset the monopoly of patents……
7. Many participants asked that governments undertake a serious review process of TRIPS so …… that countries are enabled to exclude patents on medicines and food…...
8. In the immediate term, governments are urged to urgently review their patent laws and amending them to ……….. enable the country to provide compulsory licenses, government use orders and parallel importing in simple and effective ways."
Statements made by the Novartis CEO Thomas Ebeling when announcing the company’s results for 2004 reinforce this impression. The parent of Sandoz commented that two planned areas for expansion are the rapidly expanding markets of China and India, where the company is targeting an increased presence, particularly in the generics market. ” He also said that Asia was the biggest growth market in the world for generics.
The question therefore is whether Western companies would be able to compete successfully in these markets given that, judging by the comments made in Kuala Lumpur, pricing will be the most critical issue. In view of the difficulties that many Western companies have competing even in their own domestic markets, the probability is that it will be local companies and manufacturers that take the major market share.
However, such a rush by local Asian countries to generate a cheap generics market in a hurry brings with it the possible risk that product quality might suffer in the process.
Counterfeiting is not a topic that pharmaceutical companies like to talk about and some prefer not to even admit that it exists. Nonetheless, it does exist and is quite prevalent in certain African countries with British Pharmaceutical Conference 2003 having held a session on the topic in 2003 on the subject.
The Sunday Times newspaper in South Africa suggested in an article that possibly as much as 20% of the medicines sold in South Africa are fakes or stolen and are almost impossible to distinguish from the real thing. According to WHO, in a press release in May 2005, counterfeits account for about $35 billion a year globally. Shigeru Omi, WHO Western Pacific director, said that the problem is very serious in Africa, where poverty and poor enforcement have created a breeding ground for bogus pharmaceuticals and also in Asia, where many fake drugs are manufactured.
Additionally, he said the problem is most serious in developing countries, including the Mekong region of Southeast Asia where studies have found that most drugs on sale to treat malaria are fakes.
What the Asian countries will need to remember is that there is no such thing as a free lunch and that the public does not just need cheap generics but also good quality generics. A failure to set up effective regulatory mechanisms at the same time as they promote use of generics could prove a very expensive saving in the long term.
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